Over $2.4 billion worth of goods and services cross the Canada–U.S. border daily, according to the Canadian government. (Andy Clark/Reuters/file)

Trade deal collapse would cut growth, jobs in Canada

If U.S. President Donald Trump follows up on his threats to terminate the free trade agreement between the U.S., Canada and Mexico (NAFTA), that would kill about 85,000 jobs in Canada and about half a percentage point of growth in the first year, predicts a new report.

More jobs, investment at risk

The think tank, the Conference Board of Canada, found a further 91,000 jobs would be lost in the second year and Canada would lose the ability to attract investment related to its access to U.S. markets.

Should NAFTA be rescinded, the board assumes Canada would return to most favoured nation tariffs under World Trade Organization agreement. Those tariffs would average two per cent on Canadian exports and 2.1` per cent on U.S. imports. For some goods like trucks, tariffs would be significantly higher.

The most significant effects of a NAFTA collapse would be on motor vehicle and parts exports to the U.S. (CBC)

Exports, imports would be more expensive

These tariffs would immediately make Canadian exports more expensive in the U.S. but a lower Canadian dollar would mitigate the increase in prices of Canadian goods in the U.S. It would also make U.S. imports into Canada more expensive.

The most significant effects would be on motor vehicle and parts exports followed by declines in Canadian exports of consumer goods, food and beverages, chemicals, wood products and agricultural products.

The Canadian government is working feverishly to prevent the collapse of NAFTA. Politicians of all political stripes and at all levels have gone to the U.S. to lobby counterparts, many of whom agree the end of the agreement would be bad for both countries.

Trump, entirely unpredictable

However, Trump marches to his own drummer and has proven to be unpredictable. He most recently threatened to impose heavy tariffs on steel and aluminum imports triggering the resignation of a top advisor. He then said he would exempt Canada and Mexico if they make concessions at the ongoing renegotiations of NAFTA.

Massive trade in question

Meanwhile, Canada has signed on to the Trans-Pacific Partnership and a European trade agreement and is working to secure agreements with other nations as well. It will however be difficult to drum up as much business as Canada has with the U.S. The Canadian government says “ over $2.4 billion worth of goods and services cross the Canada–U.S. border daily. 1.9 million Canadian jobs are related to Canada exports to the U.S. Canada is the largest merchandise export market for the U.S. and one of the three largest country merchandise export markets for 48 U.S. states.”

Categories: Economy, International
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